Web developer's job status leads to pay dispute

Confusion over contractor-employee distinction results in ERA case

A Palmerston North student who worked as a web developer early in 2010 has been awarded $1070 by the Employment Relations Authority for unpaid wages.

The case, heard by the Employment Relations Authority late last year, hinged on whether Michael Oliver, who did development work for Palmerston North firm Autoweb Solutions, was an employee or a contractor. The Authority determined he was an employee.

While looking for work over the 2009-2010 break through the Student Job Search agency, Oliver noticed a job headed “Web Developer – Palmerston North – Permanent”.

The job description listed “skill and experience in developing in a PHP/MySQL environment” and “Working with systems such as WordPress, Magento and Silverstripe” among the requirements, and ended with “An agreement will be made as to how this work will look, ie hours and pay as could be on contract basis.”

Oliver applied for the job on January 6, 2010 and in response, Autoweb Solutions owner Keith Brown agreed to take him on, noting: “What I am looking at is an initial project to build a database to display motor vehicles and other automotive applications such as trucks, boats, motorcycles etc.”

Brown said he would prefer that Oliver worked from home, using his own PC, and finished with “We would have a number of options with payment, either by hourly rate, contract [sic].

“If we can achieve the desired outcomes, then I would envisage that there would be sufficient work and opportunities to maintain a long-term relationship.”

The arrangement continued over the summer of 2010, but then Brown failed to pay Oliver for 53.5 hours’ work, totalling $1070, after Brown lost the client contract Oliver was working on. Brown claimed to have no money to pay Oliver.

At the resulting Employment Relations Authority hearing, held to determine whether Oliver had a legitimate claim to the $1070 sum, Oliver claimed that Brown told him no written contract was required, and Brown claimed he didn’t offer Oliver formal employment, but rather a contract at a rate of $20 per hour.

ERA member GJ Wood noted his determination, made on December 20, that: “I need not decide this conflict in evidence, because it is the real nature of the relationship, rather than the parties’ labelling of it, that will be determinative.”

In the determination, GJ Wood noted that Oliver “worked for about six weeks, averaging 5-6 hours per day”, and that he spoke to Brown “about how work was going 2-3 times a week by email or phone”, that Oliver “would send in a timesheet as required by Mr Brown each week, which was used as the basis for paying Mr Oliver” and that Oliver “provided all the tools for the job – in particular, a computer and the necessary broadband and email connections”.

Wood also noted that Oliver “had no opportunity to profit from his relationship with Mr Brown, other than by fixed payment for his hourly labour” and that “neither party expected the work to be delegated by Mr Oliver to any other people, but to be performed personally by him.”

Wood then turned to the relevant section of the Employment Relations Act and two precedent legal cases to see whether Oliver was an employee or a contractor.

After noting: “It was clearly Mr Oliver’s intention that he work as an employee, but equally it was Mr Brown’s intention that Mr Oliver not be an employee”, Wood went on to state: “What is very important in this case is the way that Mr Brown approached the offer of work.

“The job was described as permanent ... [and] Mr Oliver had to account for his hours of work hour by hour, even though he had reasonable flexibility as to when he did it.

“I therefore conclude that the degree of control by Mr Brown over Mr Oliver was more consistent with Mr Oliver’s status being that of an employee rather than as an independent contractor.”

Wood ran Oliver’s situation through two established legal tests of the employee-contractor question, the integration test and the fundamental test.

On the integration test, Oliver turned out to be an employee, with Wood noting, “While Mr Oliver provided his own business tools and worked offsite, he was an integral part of Autoweb Solutions, as one would expect of an employee.

“For instance, he was paid an hourly rate rather than a pre-arranged fee and was on occasion asked to work on different tasks.”

On the fundamental test, Oliver was also an employee. Wood notes: “Mr Oliver could not be said to be in business on his own account.

“He had no opportunity to make profit from the work he did and had no proprietary interest in that work.

“... The work remains the property of Mr Brown [and] Mr Brown claims it is his property as well, which also favours a finding of employment.”

Wood found that Oliver was an employee, not a contractor, during the time he did web development for Auto Web Solutions, and ordered Brown to pay him $1070, plus $70 in expenses.

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